The gold-silver ratio has recently dropped below the 80-level, suggesting that silver is likely to outperform gold in the near future. Analysts anticipate that silver prices could reach ₹90,000 per kilogram by December 2023.
At the beginning of August, the ratio stood at around 85, but it has since decreased to approximately 79.1. The gold-silver ratio is a key metric used to gauge the relationship between the values of gold and silver. It reveals the number of silver ounces required to match the value of one ounce of gold.
A lower gold-silver ratio implies that silver prices are expected to outperform gold prices. Historically, the ratio has not sustained levels above 82-82 and is now returning to its average range.
Ajay Kedia, Director of Kedia Advisory, explained, “The ratio has fallen to 79.1 now. This suggests that silver prices will outperform gold going forward.” Since March 2023 lows, gold prices have risen by approximately 5%, while silver prices have surged by about 20% since their March lows.
Several factors contribute to the bullish trend in silver prices. These include rising industrial demand, reduced geopolitical tensions, and economic stimulus measures, particularly in China, the world’s largest consumer of metals.
Silver is not only used in jewelry but also finds applications in solar panels, silver oxide, batteries, 5G technologies, and electrical equipment. Economic stimulus measures in China are expected to further boost industrial demand for silver.
In addition, reports indicate that China’s People’s Bank is considering reducing reserve requirements, potentially increasing liquidity in the world’s largest metal consumer.
While analysts expect the US Federal Reserve to maintain interest rates in September, elevated interest rates can weigh on bullion prices. Despite this, the positive outlook for precious metals remains strong.
Ajay Kedia predicts that silver prices on the MCX may rise toward ₹90,000 per kilogram by December 2023. Additionally, gold prices are expected to increase to ₹65,000 per 10 grams by the end of the year.
As silver continues to demonstrate its potential for strong performance, investors and market participants will closely monitor developments in both the precious metals and economic landscapes to assess opportunities in the silver market.